Issue 850, 12 April 2022
In this issue:
Proposed new AFCA funding model: consultation reminder
As reported in ASFA Action issue 845, the Australian Financial Complaints Authority (AFCA) is consulting on its proposed new funding model, which will replace the current (interim) model. The new funding model will apply from 1 July.
The proposed new funding model includes a single registration fee for financial firm members, and a simplified complaints fee structure.
Consultation material is available on the AFCA website. The consultation material includes:
- the key elements of the proposed new funding model
- the proposed new fee structure
- a comparison with the interim funding model.
If you have any feedback you would like ASFA to consider in relation to the proposed new funding model, please forward it to Andrew Craston by close of business Tuesday 19 April.
Parliament and Bills update
The election has now been called for 21 May. As a result, the House of Representatives sittings scheduled for 11 – 14 April will not go ahead and all future sittings for the 46th Parliament have also been cancelled.
Parliament has now been prorogued (dissolved) and all Bills that remained before it have lapsed. In relation to superannuation, this includes:
- New accounting and audit requirements for superannuation funds – the Treasury Laws Amendment (Streamlining and Improving Economic Outcomes for Australians) Bill 2022. This Bill proposed to amend the Corporations Act 2001, Superannuation Industry (Supervision) Act 1993 and the Australian Securities and Investment Commission Act 2001 so the financial reporting obligations imposed on RSEs are consistent with those that apply to public companies and registered schemes under the Corporations Act. See ASFA Action issue 842 for background.
- Financial Accountability Regime (FAR) for the superannuation sector - the Financial Accountability Regime Bill 2021 together with consequential amendments in the Financial Sector Reform (Hayne Royal Commission Response No. 3) Bill 2021 sought to implement the FAR. See ASFA Action issue 831 for background.
- Compensation scheme of last resort (CSLR) – the Financial Sector Reform (Hayne Royal Commission Response No. 3) Bill 2021, the Financial Services Compensation Scheme of Last Resort Levy (Collection) Bill 2021, and the Financial Services Compensation Scheme of Last Resort Levy Bill 2021 sought to establish the CSLR for the financial services industry and the levy framework to fund it. See ASFA Action issue 831 for background.
- Transitional arrangements for the Superannuation Complaints Tribunal (SCT) – the Treasury Laws Amendment (2021 Measures No. 7) Bill 2021 proposed amendments relevant to the closure of the SCT and its replacement by the Australian Financial Complaints Authority (AFCA). It provides for the transfer of records and documents from the SCT to ASIC, provides for the remittal of matters on appeal by the Federal Court and introduces a rule-making power to allow the Minister to prescribe other matters of a transitional nature. See ASFA Action issue 821 for background. Identical amendments are also contained in the Treasury Laws Amendment (2020 Measures No 4) Bill 2021 (previously titled Treasury Laws Amendment (2020 Measures No 4) Bill 2020). See ASFA Action issue 782 for background.
- Minor and technical amendments - the Treasury Laws Amendment (Enhancing Tax Integrity and Supporting Business Investment) Bill 2022 proposed minor and technical reforms to:
- ensure the product dashboard disclosure rules do not inadvertently apply to self-managed or small APRA funds
- amend social security legislation in relation to the asset-test exempt status of certain commutations of market-linked and life expectancy income streams that occur for the purposes of not exceeding the transfer balance cap
- amend tax legislation in relation to the education directions — including a superannuation guarantee education direction — that the Commissioner of Taxation can issue to an entity where the Commissioner reasonably believes there has been a failure to comply with a specified record-keeping obligation under a taxation law.
See ASFA Action issue 841 for background.
- Public sector Your Future, Your Super (YFYS) amendments - the Public Sector Superannuation Legislation Amendment Bill 2022 sought to ensure that relevant Commonwealth superannuation arrangements were treated consistently with others for YFYS purposes.
- Your Future, Your Super stapling exemption - the Superannuation Guarantee (Administration) Amendment 2021, a private member’s Bill, proposed an exclusion to the stapling measure introduced as part of the YFYS reforms for workers employed in dangerous occupations. See ASFA Action issue 829 for background.
For any of these measures to progress, they will need to be re-introduced in the new term of Parliament.
WA de facto superannuation splitting
The Western Australian (WA) Parliament is considering a Bill that is relevant to efforts to allow separating WA de facto couples to access the family law superannuation splitting regime.
As reported in ASFA Action issues 838 and 786, amendments were recently made to Commonwealth legislation and regulations giving effect to a referral of power from Western Australia to the Commonwealth in respect of superannuation matters in family law proceedings for separating de facto couples in WA. The commencement date for the Commonwealth Family Law Amendment (Western Australia De Facto Superannuation Splitting and Bankruptcy) Act 2020 (“WA De Facto Superannuation Splitting Act”) has not yet been proclaimed, and therefore the related Superannuation Legislation Amendment (Western Australia De Facto Superannuation Splitting) Regulations 2021 have not come into effect.
The WA Government has now introduced into the WA Parliament the Family Court Amendment Bill 2022 . This makes amendments necessary to reflect into WA legislation the regime created for splitting of superannuation interests by WA de facto couples by the WA De Facto Superannuation Splitting Act. (It also makes extensive, unrelated, amendments in relation to bankruptcy.)
Once passed, the operative provisions of the WA Bill that relate to superannuation will commence on a date to be proclaimed. This will accord with the commencement of the related Commonwealth regulations, which will also require the Commonwealth Powers Act to be proclaimed.
Investment switching: outcomes of ASIC trustee surveillance
In October ASIC raised concerns about superannuation trustees’ management of conflicts of interest, following surveillance of personal investment switching by trustee directors and senior executives during the time of increased market volatility arising from the COVID-19 pandemic (see ASFA Action issue 831 for background).
Following this surveillance, ASIC has reported that the trustees concerned have committed to implement a range of changes to improve arrangements for managing conflicts, including:
- updating or establishing policies and practices to address the deficiencies ASIC highlighted by:
- identifying switching as a potential conflict of interest
- incorporating steps to prevent inappropriate trading (such introducing blackout periods or trading windows)
- expanding conflicts arrangements to cover trading by related parties of directors and senior executives
- increasing board-level engagement so there is greater board oversight, input and direction. For instance, increased monitoring of staff transactions and reporting back to the board, including on switching activity
- increasing staff awareness of the policies and their obligations through greater internal communication and training
- undertaking an independent review of the trustee’s broader conflicts management frameworks.
ASIC has also completed its review of a range of transactions during the 2020 calendar year by directors, senior executives or their related parties. These transactions involved the switching of investment settings, changes to investment contribution allocations and superannuation contributions, and the withdrawal and roll in of superannuation monies. Based on the evidence obtained during its surveillance, ASIC is satisfied no further action is warranted against any individuals in relation to the identified transactions.
ASIC has indicated it will continue to work with APRA on ensuring trustees have appropriate policies and procedures in place to manage possible conflicts of interest.
COVID-19 financial advice relief to end 15 April
ASIC has announced that relief measures for financial advice, introduced on a temporary basis due to the COVID-19 pandemic, will be allowed to automatically expire on 15 April.
ASIC Corporations (COVID-19—Advice-related Relief) Instrument 2021/268 commenced on 15 April 2021. It extended two relief measures originally introduced in April 2020:
- ‘situations in which Statement of Advice is not required’ relief – this allows financial advisers to provide a record of advice, rather than a statement of advice, to existing clients requiring financial advice due to the impacts of the COVID-19 pandemic
- ‘urgent advice’ relief – this allows financial advisers additional time to give their clients a time-critical statement of advice
See ASFA Action issues 799, 777 and 759 for background.
The relief provided by the Instrument 2021/268 was due to automatically repeal on 15 April. ASIC has formed the view that “the current status of COVID-19 responses in Australia provides a sufficient basis for a decision by ASIC to further extend the relief”.
ASFA REGULATORY WATCHLIST
ASFA’s Regulatory Watchlist (ARW) tracks developments in Legislation, inquiries, consultations
and other regulatory announcements relevant to superannuation.
